Friday, May 3, 2013

Housing Market Bouncing Back?

The Great Greenspan Depression of the Millennium virtually destroyed Middle Class America and the US housing market. The Federal Reserve's massive destruction of jobs and the transfer of wealth from the illiquid unlucky to the liquid lucky caused worldwide chaos and opened opportunities to those with the right inside contacts in Wall Street or the "lucky ones" able to somehow maintain liquidity.

But what comes down too much also does come up eventually...

The following chart provides some perspective on the single-family home market. It  presents the median single-family home price divided by the price of one ounce of gold. This results in the Home Price / Gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes a relatively low 116 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down 74% from its 2001 peak.

Since making new 32 year lows last year, home prices (priced in that other global currency - gold) have worked their way higher. In fact, the median single-family home priced in gold has just broken above its eight-year, downward sloping trend channel.

3 comments:

  1. Thanks for sharing this article. I sure hope it is bouncing back =)

    ReplyDelete
  2. Wow, that chart says it all. Great analogy, puts it all in perspective. Nice to see the trend going up.

    ReplyDelete

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